This
is a test. What do you do with your bank statement when it arrives
in the mail?

A) Tear it open and reconcile
it with account transactions.

B) Toss it aside with the offers
from credit card companies.

C) Use it to sop up the coffee
you just spilled.

D) File it away without looking
at it.

Time's up. I answered "B." But that was before
I talked to Cathy from Carol Stream, Illinois. From now on I'll
answer "A."

Cathy, who asked that we not use her last name,
opted for "D" one day in 1994. And until September of 2000, she
always had enough money in her checking account to cover all her
checks. That's when the bank sent her the stomach-churning notice
that there wasn't enough money in her account to cover her mortgage
payment. Amazingly, she had bank statements going back to 1992 and
went over them line-by-line until she found a deduction of $693.10
in July 1994 that didn't jibe with her checkbook. Cathy believes
a fraudulent check was drawn against her account.

So she notified bank personnel and asked them
to investigate. The bank said she waited too long to find and report
her claim. The end result is she's not getting her money back. Cathy
and her bank, which we're also not naming, have parted company over
the issue. The bank is declining to make any public comments about
the situation.

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"It makes me sick to my stomach," says Cathy.
"There's nothing I can do. I'm not going to get my money back. I
think if the bank made a mistake they should correct it. I don't
think there should be a time frame."

Know the rules and regs
Cathy's bank, like all banks, has its own list of rules and regulations.
You should get a copy when you open an account, but if you don't
read it, it could come back to haunt you. At Cathy's bank the "Terms
and Agreements" for flexible checking accounts states that customers
have "30 days from the time the statement is mailed to notify the
Bank of any forgeries, unauthorized signatures, alterations or errors."
If the customer doesn't make a claim in that time frame, they waive
their right to make a claim regarding that problem.

In a letter to Cathy, the bank reminded her
of the terms and agreements and also noted that the Uniform Commercial
Code allows a customer up to one year to notify the bank of any
errors. The bank indicated it would have granted Cathy the UCC's
one-year statute of limitations to report the problem -- but not
the six years it took her.

While the time it took Cathy to find the alleged
error is probably extreme, even people who find errors in a more
timely fashion could make a costly mistake if they think the national
UCC gives them a year to make a claim.

The UCC, which focuses on commercial law, is
a guideline. Banks are free to set stricter rules as long as the
customer knows and agrees. When you opened your bank account and
signed a load of papers, one of them said you agreed to the bank's
"terms and agreements."

"The UCC has very few mandatory rules which
the parties can't vary by agreement," says Linda Rusch, Chairwoman
of the UCC Committee. "The point of the UCC is that it sets up a
uniform system of liability. The mindset is freedom of the parties
to make a contract -- and unless it violates a rule, they should
be free to make it. It's not like consumer protection statutes where
you can't vary."

Let's get reasonable
Rusch says banks have to be reasonable -- a bank couldn't decide
to give customers just one day to review their statement and report
any errors, but, she says, a Minnesota appeals court found 14 days
to be reasonable.

Scott Clark, assistant commissioner at the Illinois
Office of Banks and Real Estate, says the 30 days allowed by Cathy's
bank is a reasonable amount of time.

"Certainly, banks make mistakes as do customers
and that's why it's important for consumers to make sure no unauthorized
charges have been made and all deposits are credited. Consumers
should review their account balances as soon as they get the statement
and contact the bank as soon as they discover any errors or discrepancies."

Cathy learned a lesson the hard way -- she's
out nearly $700. For the rest of us, it's a safe bet this month's
statement won't get tossed aside.

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